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MPM701A Business Process Management: Porter’s Five Forces

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Michael Porter, How Competitive Forces Shape Strategy

The past three weeks you wrote essays with the help of your fellow class mates, and your tutor. This week there will be no class, and you will do the questions all by yourself. Like the previous weeks the questions are meant to help you come to grips with the article, and they form the basis of the essay you will write.

Michael Porter was successful in putting the content of business strategy to avoid competition center stage. His work belongs to the positioning school, which teaches that the position of the company could explain or predict performance in the industry. Porter’s work focuses on the industry environment in which a company operates: it is the job of the strategist to find an optimal fit between the company and its environment. That job is dynamic: a good strategist has means to channel the change of the competitive environment somewhat too.

Read the questions below before you read the article. Answer them after you have studied the article.

  1. Porter writes: “ntense competition in an industry is neither coincidence nor bad luck.” (page 137, upper-left). What are Porter’s main arguments for this view?
  1. According to Porter, there exist five forces which affect the performance of a company. What are these forces, and what do they involve?
  1. According to Porter, how should a company formulate its competition strategy?
  1. According to Porter, companies should choose a generic strategy. One such a possible strategy is cost leadership: being able to produce the product cheaper than competitors, so as to offer a lower price to the customer. There exists another strategy which is explained by the Dr Pepper example. Which strategy is this?
  1. How can a strategist help a company exploit industry change?
  1. What is multifaceted rivalry?

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